Review of Milton Friedman's economics ideas (1)

First of all, I think that our modern economic activities have been too complicated to be precisely described by any economic theorems, especially when we study from a macroeconomics prospect; therefore, I cannot say one of the greatest economists, Milton Friedman, is always right about his economics ideas.

Milton Friedman in his paper "The Role of Monetary Policy" suggested that the priority of monetary policy is to stabilize the price level and the monetary policy should be carried out without "sharp swings". These two ideas are still generally agreed by the current central banks in worldwide. However, Milton Friedman was not a fan (at least in his paper, "The Role of Monetary Policy) of inflation or deflation that he believed that with a carefully designed monetary policy, the economy can grow moderately without an inflation or a deflation. The current belief is a moderate inflation is good for economies and a low inflation is worrying that can send a signal to the market that the economy is in its decline.

In a very simple demand and supply model, an inflation can indicate a continuous excess of demand or shortage of supply and a deflation can indicate a continuous excess of supply or shortage of demand. When there is a continuous excess of demand or shortage of supply, it means more business activities can be carried out to supply for the excess of demand in the economy; while there is a continuous of excess of supply, more business activities should be stopped. Moreover, when there is no change in the price level, it means the market is at its equilibrium, if there is no force that moves either supply or demand side away from the equilibrium point, the economy is stable and there is no potential growth in it.

From this aspect,  I do not agree with Friedman's "by making that course one of steady but moderate growth in the quantity of money, it would make a major contribution to avoidance of either inflation or deflation of prices." Maybe because of my ignorance, I misunderstand his point, I still believe any kind of inflation, (even more extremely hyperinflation) is better than no price change or deflation, that inflation indicates the potential future growth of our economy while others have no or even negative impact on the economic growth.